Day: April 6, 2021

A limited company purchases a partnership.

It issues to the partners 10 % debentures and pays them cash in full settlement of the purchase price. 

Which of the following is true?

Select ONE answer:

1. The company’s gearing is reduced.
2. The company intended to expand its business.
3. The company’s reserves are reduced.
4. The partners now own some of the equity in the company.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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